The S&P/ASX 200 index has pulled back in the past two days as the recent momentum fades. The index, which tracks the biggest companies in Australia, retreated to a low of A$7,057, down from this month’s high of A$7,165. It has dropped by more than 7% from the highest point in 2023.
RBA and Fed decisions
The biggest catalyst for the ASX 200 index was the actions of the Federal Reserve and the Reserve Bank of Australia (RBA). On Friday, Jerome Powell, the head of the Federal Reserve warned that the Fed still had more work to do in its fight against inflation.
He cautioned investors against betting that the bank will slash interest rates soon. At the same time, he hinted that the bank will hike interest rates again if inflation remains above its 2% target. This explains why American equities like the Dow Jones and the S&P 500 indices retreated.
Meanwhile, in Australia, the RBA did what most analysts were expecting. It left interest rates unchanged at 4.35% a month after it surprised the market by hiking them by 0.25%. In a statement, the RBA warned that it could hike rates again in a bid to fight inflation. The statement added:
“Whether further tightening of monetary policy is required to ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks.”
Most economists believe that the RBA will focus on the country’s quarterly inflation data scheduled for January. A higher-than-expected figure will trigger another rate hike. On the other hand, if inflation slips, it will likely lead to a continued pause.
There were some important movers in the ASX 200 index on Tuesday. Origin Energy share price retreated and then bounced back to $A8, a day after shareholders voted against an acquisition by Brookfield. The Canadian private equity firm wanted to acquire it in a $13 billion deal.
Other top-movers in Australia were Capricorn Metals whose shares fell by 6.8% after key officials dumped shares. Evolution Mining stock halted ahead of a big share placement. Life360 share price dropped after a co-founder sold stock.
ASX 200 bank stocks moved sideways after the RBA decision. CBA and ANZ Group stock prices fell by more than 0.56% while Westpac fell by just 0.14%.
ASX 200 index forecast
The S&P/ASX 200 index has moved sideways in the past few days. In this period, the stock has remained between the key support at $A7,000 AND $A7,150. It is also oscillating at the 50-day and 100-day Exponential Moving Averages (EMA). Most recently, the index has formed a small double-top pattern at $A7,150.
Therefore, the outlook for the ASX 200 index is neutral with a bearish bias. If this happens, the key price to watch will be at $A6,977, the lowest swing on November 28th. A break below that price will open the possibility of the index plunging to $A6,735. Watch here: https://www.youtube.com/embed/713QnuUDBz4?feature=oembed
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